Tips for Tax Season!

If you’re like most Canadians, taxes take a big bite out of your wallet every year. For many of us they’re our single largest expense. Fortunately, there are a few ways to save on taxes and keep more of your hard-earned money.

Here are a few strategies to lighten your tax bill:

• Contribute to your RRSP. Then claim the deduction at tax time. Your annual allowable contribution is 18% of your previous year’s earned income (minus pension adjustments) to a maximum amount determined by the government. For your personal RRSP deduction limit, check the Notice of Assessment sent to you by the Canada Revenue Agency after you’ve filed your tax return.
• If you are retired, optimize your pension tax credit. The pension credit can save you up to $350 each year, however it doesn’t carry over – use it or lose it! If you are over 65 and not yet 71 years old, you will need to convert some or your RRSP investments to a RRIF in order to take advantage of this tax credit.
• Consider spousal RRSP contributions. As long as your spouse is under the age of 71, you may want to contribute to a spousal RRSP, which offers the same tax savings as a regular RRSP.
• Give to charity. Charitable donations made by December 31 are eligible for this tax year. Instead of cash, you may be able to donate certain securities you own “in-kind”, to avoid paying capital gains tax. Your charitable receipt will be based on the current market value on the donated securities. Talk to a Qtrade Advisor about which securities qualify.
• Take advantage of a tax-free savings account. TFSA’s allow you to grow your investments tax-free. You can contribute up to $6,500 in 2023 and up to $81,500 in total. One of the bonuses of TFSA’s is that if you withdraw some of your savings during the year, you are entitled to re-contribute those funds back to the TFSA the following year.
• Give your spouse the gift of a TFSA contribution. If you need an alternative to a spousal RRSP contribution, either due to age or other factors, the gift of a TFSA contribution will allow you to take full advantage of available TFSA room. And the rules for tax-free growth still apply. Your spouse will need to have their own TFSA and use this as their own TFSA contribution.
• Consider tax-loss selling. By selling non-registered assets that have dropped below their purchase value you can generate a capital loss and use it to offset any capitalized gains you’ve realized in either the three previous years, this year, or in the future. To claim the loss, your trade must be settled before the annual government-imposed deadline.
• Make RESP contributions. Invest up to $2,500 in a Registered Education Savings Plan (RESP) before December 31st and you’ll qualify to receive a government-sponsored Canada Education Savings Grant of between 20-24% of your contribution (to a maximum of $600).
• Split your pension income. Transfer up to 50% of qualifying pension earnings to a lower income earning spouse or common-law partner. The transferred money will be taxed at their lower income tax rate.
• Pay your tax-deductible expenses. To claim them for this tax year, pay tax deductible expenses like alimony, professional fees, union dues, eligible accounting/legal fees, and medical bills by December 31.
• Consider the multigenerational home renovation tax credit. Starting in 2023, a refundable tax credit of up to $7,500 is available for families who construct a secondary suite for seniors in their home. Rather than benefitting the retiree directly, this would benefit the homeowner, likely an adult child.

Every life stage comes with new questions. Kindred’s Wealth and Investment Team is here to answer all your questions and offer personalized advice that helps you make the most of your retirement. We’re committed to sharing our expertise, simplifying your options, and offering you choices that align with your values. Honest conversations will help us understand your financial position and your priorities, so we can develop a plan using your money in a way that fits your values. For detailed advice on how to take advantage of these tax savings strategies, and a few others, drop by your local Kindred branch and talk with one of our Wealth and Investment Advisors.

Mutual funds are offered through Qtrade Asset Management (a tradename of Credential Asset Management Inc). Mutual funds and other securities are offered through Qtrade Advisor, a division of Credential Qtrade Securities Inc. The information contained in this report was obtained from sources believed to be reliable; however, we cannot guarantee that it is accurate or complete. This report is provided as a general source of information and should not be considered personal investment advice or a solicitation to buy or sell any mutual funds and other securities.